UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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☐ | Soliciting Material Pursuant to §240.14a-12 | |
Educational Development Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Notice of Annual Meeting
and Proxy Statement
Annual Meeting of Shareholders
Thursday, July 9, 2020
EDUCATIONAL DEVELOPMENT CORPORATION
5402 S 122nd E Ave
Tulsa, Oklahoma 74146
June 12, 2020
To The Shareholders of Educational Development Corporation:
You are cordially invited to attend the 2020 annual meeting of shareholders of Educational Development Corporation on Thursday, July 9, 2020 at our Corporate Offices, 5402 S 122nd E Ave, Tulsa, Oklahoma, commencing at 10:00 a.m., Central Standard Time.
The notice of the annual meeting and proxy statement accompanying this letter provide information concerning matters to be considered and acted upon at the annual meeting. During the annual meeting we will provide a report on our operations, followed by a time for questions and answers.
Whether or not you plan to attend the annual meeting, we encourage you to sign and return the enclosed proxy card as promptly as possible in the enclosed postage paid envelope so that your shares are represented at the meeting. Regardless of the number of shares you own, your vote is important.
Thank you for your continued interest and support.
Sincerely,
Randall W. White
Chairman of the Board, President and Chief Executive Officer
Enclosures
EDUCATIONAL DEVELOPMENT CORPORATION
5402 S 122nd E Ave
Tulsa, Oklahoma 74146
(918) 622-4522
NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS
TIME AND DATE: | 10:00 a.m. CST on July 9, 2020 |
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PLACE: | Educational Development Corporation Corporate Office, Executive Conference Room 5402 S 122nd E Ave Tulsa, Oklahoma |
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ITEMS OF BUSINESS: | (1) To elect one Class I director |
| (2) To ratify the appointment of HoganTaylor LLP as our independent registered public accounting firm for the year ending February 28, 2021 |
| (3) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof |
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WHO CAN VOTE: | You are entitled to vote if you were a shareholder of record at the close of business on the record date, June 4, 2020. |
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VOTING BY PROXY: | Please submit a proxy as soon as possible so that your shares of our common stock can be voted at the annual meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions on the enclosed proxy card. |
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2020 ANNUAL REPORT: | A copy of our fiscal year 2020 Annual Report is enclosed. |
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DATE OF MAILING: | This notice, the attached Proxy Statement, the accompanying proxy card and our 2020 Annual Report are first being mailed to shareholders on or about June 12, 2020. |
By Order of the Board of Directors
Randall W. White,
Chairman of the Board, President and Chief Executive Officer
Tulsa, Oklahoma
June 12, 2020
WHO MAY ATTEND THE ANNUAL MEETING?
All shareholders who held shares of our common stock on June 4, 2020 may attend. If your stock is held in the name of a broker, bank, or other holder of record, often referred to as “in street name,” bring a copy of your brokerage account statement or a proxy card which you can get from your broker, bank, or other holder of record of your stock.
WHAT IS A PROXY?
A proxy is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. Randall W. White and Dan O’Keefe have been designated by the Company as proxies for the 2020 annual meeting of shareholders.
WHO CAN VOTE AT THE MEETING?
The record date for the 2020 annual meeting of shareholders is June 4, 2020. The record date was established by our Board of Directors. Shareholders of record at the close of business on the record date are entitled to:
(a) receive notice of the meeting; and
(b) vote at the meeting and any adjournments or postponements of the meeting.
On the record date, 8,352,253 shares of our common stock were outstanding. Each shareholder is entitled to one vote for each share of common stock held on the record date, except that cumulative voting is authorized with respect to the election of directors, as further described under “Voting Securities,” in this Proxy Statement.
HOW DO I VOTE?
You may vote in person at the meeting or you may appoint a proxy, by mail, to vote your shares. If you return a signed card but do not provide voting instructions, your shares will be voted FOR the proposals to be voted on at the meeting.
WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON STOCK?
(a) By Written Proxy: Shareholders of record can vote by marking, signing, and timely returning the enclosed proxy card. Street name or beneficial holders must follow the directions provided by their broker, bank, or other nominee in order to direct such broker, bank, or nominee how to vote.
(b) In Person: All shareholders may vote in person at the meeting. Street names or beneficial holders must obtain a legal proxy from their broker, bank, or nominee prior to the meeting in order to vote in person.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
A majority of our outstanding shares of common stock, as of the record date, must be present at the annual meeting in order to hold the annual meeting and conduct business. This is called a quorum. Shares of our common stock are counted as present at the annual meeting if the holder of such shares:
(a) is present and votes in person at the annual meeting; or
(b) has properly submitted a proxy card.
HOW ARE ABSTENTIONS COUNTED?
Abstentions are counted as present for the purpose of determining the presence of a quorum. Abstentions do not count as votes cast and have no effect on the election of directors. However, for the ratification of HoganTaylor LLP as our independent auditor, abstentions have the same effect as votes against the proposal.
HOW DO I REVOKE MY PROXY?
You have the right to revoke your proxy at any time before the meeting by:
(a) notifying our corporate secretary in writing;
(b) returning a later-dated proxy card; or
(c) voting in person.
WILL MY STOCK BE VOTED IF I DO NOT PROVIDE MY PROXY?
Your stock may be voted if it is held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have the authority under the rules of The NASDAQ Stock Market, Inc., or NASDAQ, to vote stock for which their customers do not provide voting instructions on certain “routine” matters. We believe that the ratification of our independent registered public accounting firm is a routine matter for which brokerage firms may vote stock that is held in the name of brokerage firms but do not have voting instructions from you.
WHAT IF A SHAREHOLDER DOES NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY?
Shareholders should specify their choice for each matter on the enclosed proxy. If no specific instructions are given, proxies that are signed and returned will be voted FOR the election of all director nominees and FOR the ratification of independent registered public accounting firm.
WHAT HAPPENS IF I DON’T VOTE?
If you do not return your proxy, or vote in person or through a firm, your non-vote will have no effect on the outcome.
WILL ADDITIONAL PROPOSALS BE PRESENTED, OTHER THAN THOSE INCLUDED IN THIS PROXY STATEMENT?
We know of no matters to be presented at the annual meeting other than those included in this notice. By signing the proxy card you are also giving authority to the persons named on the proxy card to take action on additional matters that may properly come before the annual meeting. Should any other matter requiring a vote of shareholders arise, the persons named in the accompanying proxy card will vote according to their best judgment.
HOW MANY VOTES ARE NEEDED TO APPROVE OUR PROPOSALS?
The affirmative vote of a plurality of the shares of common stock present in person or by proxy and entitled to vote is required for the election of a director. However, other matters that may properly come before the annual meeting may require a majority or more than a majority vote under our by-laws, the laws of the state of Delaware, our Amended and Restated Certificate of Incorporation, or other applicable laws.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
If your shares are registered differently and are in more than one account, you will receive more than one proxy card and proxy statement. Please sign and return all proxy cards to ensure that all your shares of common stock are voted. We encourage you to have all accounts registered in the same name and address whenever possible.
WHAT IF ONLY ONE COPY OF THESE PROXY MATERIALS WAS DELIVERED TO MULTIPLE SHAREHOLDERS WHO SHARE A SINGLE ADDRESS?
In some cases, only one copy of this Proxy Statement is being delivered to multiple shareholders sharing an address unless we have received contrary instructions from one or more of the shareholders. We will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and the accompanying 2020 Annual Report to a shareholder at a shared address to which a single copy of the document was delivered. To request a separate delivery of these materials now or in the future, a shareholder may submit a written request to Corporate Secretary, Educational Development Corporation, 5402 S 122nd E Ave, Tulsa, OK 74146 or an oral request by telephone at (918) 622-4522. Additionally, any shareholders who are presently sharing an address and receiving multiple copies of either the Proxy Statement or the 2020 Annual Report, and who would rather receive a single copy of such materials, may instruct us accordingly by directing their request to us in the manner provided above.
WHO BEARS THE COST OF THIS SOLICITATION?
This accompanying proxy is being solicited by and on behalf of our Board of Directors. We will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials. In addition, we may reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries representing beneficial owners of shares of our common stock for their expenses in forwarding solicitation materials to such beneficial owners. In addition to sending you these materials, some of our directors, officers and employees may contact you personally or by mail, telephone, facsimile, email or other means of communication (electronic or otherwise). No additional compensation will be paid for such services but out-of-pocket expenses may be reimbursed.
WHAT IS THE DIFFERENCE BETWEEN HOLDING STOCK AS A “SHAREHOLDER OF RECORD” AND HOLDING STOCK AS “BENEFICIAL OWNER” (OR “IN STREET NAME”)?
Most shareholders are considered the “beneficial owners” of their stock, that is, they hold their stock through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between stock held of record and stock owned beneficially or in “street name.”
(a) Shareholder of Record: If your stock is registered directly in your name with our transfer agent, you are considered the shareholder of record with respect to that stock and proxy materials are sent directly to you by us. As our shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the annual meeting. We have enclosed a proxy card for your vote.
(b) Beneficial Owner: If your stock is held in a stock brokerage account, by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank, or nominee (who is considered the shareholder of record with respect to those shares). As the beneficial owner, you have the right to direct your broker, bank, or nominee on how to vote if you follow the instructions you receive from your broker, bank, or nominee. You are also invited to attend the annual meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the annual meeting, unless you request, complete, and deliver the proper documentation provided by your broker, bank or nominee and bring it with you to the meeting.
Our $0.20 par value common stock is the only class of capital stock authorized by its Amended and Restated Certificate of Incorporation. The number of shares of our common stock which may be voted at the meeting or any adjournment thereof is 8,352,253 shares, which was the number of shares outstanding as of June 4, 2020, the record date. Each shareholder is entitled to one vote for each share of our common stock held, except that cumulative voting is authorized with respect to the election of directors. In other words, solely for the purpose of electing directors, each share of our common stock will entitle the holder thereof to a number of votes equal to the number of directors being elected and each shareholder may cast all of his votes for a single nominee, or may distribute them among any two or more nominees. Votes will be tabulated by an inspector of election appointed by our Board of Directors.
PROPOSAL FOR ACTION AT THE ANNUAL MEETING
Proposal One:
ELECTION OF DIRECTOR
Our Amended and Restated Certificate of Incorporation and By-laws provide that the Board of Directors shall consist of three to fifteen directors, the exact number of which is determined by resolution of the Board of Directors or by the shareholders at the annual meeting. On May 29, 2020 the Board of Directors adopted a resolution to temporarily expand the Board of Directors from five (5) to six (6) for the month of June to allow the addition of Joshua J. Peters to the Board and succession of Betsy Richert, who has resigned from the Board effective June 30, 2020.
Our Amended and Restated Certificate of Incorporation and By-laws provide that the Board of Directors shall be divided into three classes, each consisting of as close to one-third of the total directors as possible. Each class of directors serves a three-year term expiring at the annual meeting of shareholders in the year listed in the table below:
Class I (2020) | Class II (2021) | Class III (2022) |
Joshua J. Peters | Ronald T. McDaniel | John A. Clerico |
Dr. Kara Gae Neal | Randall W. White |
Based on the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Joshua J. Peters for election as a Class I director, to serve a three-year term to expire at the annual meeting of shareholders in 2023, or until successors are duly elected and qualified. Mr. Peters was added to the board via unanimous consent on May 29, 2020 and qualifies as a financial expert under the guidelines published by the Securities and Exchange Commission and, along with the remaining independent directors, is expected to serve on the Audit, Compensation and Governance Committees.
Directors in Class II and Class III are not being re-elected this year and will continue in office for the remainder of their terms, as described above, unless such directors resign or their service as directors otherwise ceases in accordance with our Amended and Restated Certificate of Incorporation and By-laws.
The persons named in the accompanying proxy card intend to vote such proxy in favor of the election of the nominee named below, who is currently a director, unless authority to vote for the director is withheld in the proxy. Although the Board of Directors has no reason to believe that the nominees will be unable to serve as a director, if a nominee withdraws or otherwise becomes unavailable to serve, the persons named as proxies will vote for any substitute nominee designated by the Board of Directors, unless contrary instructions are given on the proxy.
The affirmative vote of a plurality of the shares of our common stock present in person or by proxy at the meeting and entitled to vote is required for the election of the directors. Proxies for which authority to vote for the nominee is withheld and broker non-votes will be tabulated for the purpose of computing the number of shares of our common stock present for purposes of determining the presence of a quorum for the meeting. They will have no effect on the outcome of the election of the directors.
Your Board of Directors recommends you vote “FOR” the nominee.
Listed below is certain information with respect to the nominee for election as director and each continuing director.
NOMINEE
Name and Business Experience | Age | Class | Director Since |
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Joshua J. Peters | 43 | I | 2020 |
Chief Investment Officer and Principal of Zenith Sterling Advisers, LLC, since 2018. Vice President – Director Equity Research at Oppenheimer Funds, serving as lead portfolio manager from 2016 to 2018. Director of Equity – Income Strategy at Morningstar, serving as editor and portfolio manager from 2004 to 2016.
CONTINUING DIRECTORS
Name and Business Experience | Age | Class | Director Since |
Ronald T. McDaniel | 82 | II | 2010 |
Retired Vice President of Sales, Educational Development Corporation, Tulsa, Oklahoma from September 2000 to June 2010.
Dr. Kara Gae Neal | 82 | II | 2011 |
Current Curriculum Director, School of Urban Education, The University of Tulsa from 2012. Former Superintendent and CEO of Tulsa Technology Center, Tulsa, Oklahoma from 2008 to 2012.
John A. Clerico | 78 | III | 2004 |
Co-founder and Chairman of ChartMark Investments, Inc., an investment management firm, since 2000. Executive Vice President and Chief Financial Officer of Praxair, Inc., an industrial gas company, from 1992 to 2000.
Randall W. White | 78 | III | 1984 |
President, Chief Executive Officer and Chairman of the Board of EDC since 1986 and Treasurer of EDC from February 1984. From 1980 until joining EDC in 1983, Chief Financial Officer of Nicor Drilling Company, Tulsa, Oklahoma, an oil and gas drilling company.
BOARD RESPONSIBILITIES
Our Board of Directors, which is elected by our shareholders, is responsible for directing and overseeing the business and affairs of the Company. In carrying out its responsibilities, the Board of Directors selects and monitors the top management of the Company, provides oversight of our financial reporting processes and determines and implements our governance policies.
BOARD LEADERSHIP STRUCTURE
Our Board of Directors is currently led by Randall W. White, who is the Chairman of the Board, President and Chief Executive Officer. The Board has chosen John A. Clerico to serve as a lead independent director.
The Board currently believes that, in addition to his leadership role as our Chief Executive Officer, Mr. White is the most qualified and appropriate individual to lead our Board as its Chairman and that combining the offices of Chairman of the Board and Chief Executive Officer presently provides the most effective leadership model for our Board and our Company. In making this determination, the Board has considered, among other factors, Mr. White’s strong leadership skills, his extensive knowledge and experience regarding our operations and the markets in which we compete, as well as his ability to promote communication, to synchronize strategic objectives and activities between our Board and management, and to provide consistent leadership to both our Board and our Company as a whole. The Board also believes our current leadership structure ensures significant independent oversight of management, as Mr. White is the only member of the Board who is also an employee of our Company and who does not meet the independence criteria set forth in our director independence guidelines and the independence criteria established by the NASDAQ. In addition, our Board has an ongoing practice of holding executive sessions, without management present, as part of each regularly scheduled in-person Board meeting.
CORPORATE GOVERNANCE
The primary goal of our Board is to maximize shareholder value over the long term. Our Board of Directors and management are committed to good corporate governance to ensure that the Company is managed for the long-term benefit of our shareholders. During the past year, our Board of Directors and management performed a review of our corporate governance policies and practices. Our corporate governance policies and practices are in accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and listing standards issued by the Securities and Exchange Commission (“SEC”) and NASDAQ.
We have in place a variety of policies and practices to promote good corporate governance. Consistent with our Corporate Governance Guidelines, the majority of our Board of Directors is independent in accordance with the rules of NASDAQ and all members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee also meet the NASDAQ guidelines for independence. The Compensation Committee, which evaluates our CEO’s performance in light of corporate goals and objectives, approves the compensation of the CEO.
The Nominating and Corporate Governance Committee of our Board of Directors is responsible for reviewing the Corporate Governance Guidelines periodically and reporting and making recommendations to the Board concerning corporate governance matters. Among the matters addressed by the Corporate Governance Guidelines are:
♦ Director Independence - Independent directors shall constitute at least a majority of our Board of Directors.
♦ Monitoring Board Effectiveness - The Corporate Governance Guidelines require that the Board, led by the Nominating and Corporate Governance Committee, conduct an annual self-evaluation of the functioning of the Board and the Board Committees.
♦ Executive Sessions of Independent Directors - The non-employee directors have the opportunity to regularly meet without management present.
♦ Board Access to Independent Advisors - Our Board of Directors as a whole, and each of its Committees separately, have authority to retain such independent consultants, counselors or advisors to the Board or its Committees as each shall deem necessary or appropriate.
♦ Board Committees - All members of the Audit, Compensation, and Nominating and Corporate Governance Committees are required to be independent in accordance with NASDAQ Rules.
Copies of our Director Independence Standards, Code of Conduct and Ethics and Audit, Compensation and Nominating and Corporate Governance Committee charters can be found on our website at http://www.edcpub.com.
MEETINGS OF THE BOARD OF DIRECTORS
Our Board of Directors held five meetings during fiscal year 2020. Directors can attend the meeting in person or via teleconference and the attendance of a majority of independent directors is required to have a quorum. The sufficient number of independent directors attended each meeting to establish a quorum at the Board meeting and the Board Committees on which they served in fiscal year 2020. Under our Corporate Governance Guidelines, directors are expected to be active and engaged in discharging their duties and to keep themselves informed about the business and operations of the Company. Although we have no formal policy, directors are expected to make every effort to attend the annual meeting of shareholders. Last year, two of our independent directors attended our annual meeting.
CODE OF BUSINESS CONDUCT AND ETHICS
We have a Code of Conduct and Ethics that applies to all of our directors, officers and employees, including our Chief Executive Officer and Principal Accounting Officer. During fiscal year 2020, no waivers were granted to any provision of the Code of Conduct and Ethics. A copy of our Code of Conduct and Ethics is available on our website at http://www.edcpub.com.
INDEPENDENCE OF DIRECTORS
The Board of Directors has determined that each of John A. Clerico, Ronald T. McDaniel, Dr. Kara Gae Neal, and Joshua J. Peters is “independent” within the meaning of Rule 4200(a)(15) of the NASDAQ listing standards. A copy of our Director Independence Standards is available on our website at http://www.edcpub.com.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
You may communicate with our directors, individually or as a group, by writing to Board of Directors, Educational Development Corporation, 5402 S 122nd E Ave, Tulsa, Oklahoma 74146. All such communications will be forwarded to the relevant director(s), except for solicitations or other matters not related to the Company.
NOMINATION PROCESS
The members of the Nominating and Corporate Governance Committee (the “Nominating Committee”), other than incumbent director nominees, discuss the qualifications of the director nominees and the needs of the Company. The Nominating Committee will consider nominees recommended by our directors, officers and shareholders. In evaluating director candidates, the Nominating Committee considers factors that are in the best interests of the Company and its shareholders, including, but not limited to, the knowledge, experience, integrity and judgment of possible candidates for nomination as directors; the potential contribution of each candidate to the diversity of backgrounds, experience and competencies which the Nominating Committee desires to have represented on the Board of Directors, including familiarity with and experience in our specific industry; the NASDAQ’s requirements for directors, including any applicable independence standards and other qualifications and experience; each candidate’s ability to devote sufficient time and effort to his or her duties as a director of the Company and, where applicable, prior service as a director of the Company. There are, however, no stated minimum criteria for director nominees. The Nominating Committee recommends candidates to the Board of Directors for election at the annual meeting of shareholders.
SHAREHOLDER NOMINATIONS FOR DIRECTORS
The Nominating Committee of the Board of Directors will consider candidates for director nominees that are recommended by shareholders of the Company in accordance with the procedures set forth below. Any such nominations should be submitted to the Nominating Committee of the Board of Directors in care of the Corporate Secretary, Educational Development Corporation, 5402 S 122nd E Ave, Tulsa, Oklahoma 74146 and accompany it with the following information:
♦ Appropriate biographical information, a statement as to the qualifications of the nominee and any other information relating to such nominee that is required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and
♦ The name(s) and address(es) of the shareholder(s) making the nomination and the number of shares of the Company’s common stock which are owned beneficially and of record by such shareholder(s).
The written recommendation should be submitted at least nine months prior to the next regularly scheduled annual meeting of shareholders in order to provide the Nominating Committee sufficient time to review the candidate and his or her qualifications and to make their recommendation to the Board of Directors.
FISCAL YEAR 2020 COMPENSATION OF DIRECTORS
Name | Fees earned or paid in cash($) | Stock awards($) | Option awards($) | Non-equity incentive plan compensation | Nonqualified deferred compensation earnings | All other compensation($) | Total($) | |||||||||||||||||||||
Betsy Richert (1) | 2,000 | 6,580 | - | - | - | - | 8,580 | |||||||||||||||||||||
Ronald T. McDaniel | 2,000 | 6,580 | - | - | - | - | 8,580 | |||||||||||||||||||||
Dr. Kara Gae Neal | 1,600 | 6,580 | - | - | - | - | 8,180 | |||||||||||||||||||||
John A. Clerico | 1,600 | 6,580 | - | - | - | - | 8,180 | |||||||||||||||||||||
Randall W. White | - | - | - | - | - | - | - | |||||||||||||||||||||
(1) | Betsy Richert resigned from the Board of Directors effective June 30, 2020 and has been replaced by Joshua J. Peters. Mr. Peters received no Board service compensation during fiscal 2020. |
As compensation for all services rendered as a director of the Company, the Company has a standard arrangement whereby a director who is not also an officer of the Company is paid $400 for each directors’ meeting attended in person or telephonically. Each director who is not also an officer of the Company and who is a member of and attends a meeting of a Committee of the Board of Directors, held separate from the Board of Directors meetings, is paid $150 for such attendance.
From time to time the Board of Directors have received options and stock grants as part of their overall compensation. However, we do not have any formal policies or procedures relating to granting options or stock to the members of our Board of Directors as a part of compensating such members for their service. During fiscal year 2020 we granted each director 1,000 shares as compensation for past services on the board of directors.
COMMITTEES OF BOARD OF DIRECTORS
The Executive Committee is responsible for assisting management in establishing long-term plans, budgets and marketing and development plans. A written charter governs its activities. The Executive Committee consists of Messrs. Clerico, McDaniel and White. No separate meetings of this Committee were held during the fiscal year ended February 29, 2020. All Executive Committee actions were taken by the Board of Directors as a whole during the regular Board of Directors meetings.
The Compensation Committee is composed of independent directors (as defined by NASDAQ) and is responsible for determining the compensation of our executive officers and administering our equity compensation plans. A written charter governs its activities. The Compensation Committee consists of Mr. Clerico, Mr. McDaniel and Dr. Neal. The Compensation Committee held one meeting during the fiscal year ended February 29, 2020 (see Compensation Committee Report elsewhere in this Proxy Statement).
The Audit Committee is composed of independent directors (as defined by NASDAQ). The Audit Committee consists of Mr. Clerico, Mr. McDaniel and Dr. Neal. Mr. Clerico serves as the Audit Committee’s financial expert and chairman of the Committee and qualifies as independent under the NASDAQ listing standards. A written charter governs their activities. The Audit Committee is responsible for the compensation, appointment and oversight of the independent registered public accountants and reviews our financial statements and any audit reports from the independent registered public accountants. Annually, the Audit Committee considers the qualifications of the independent registered public accountants of the Company, as well as the impact of changing public accountants when assessing whether to retain the current public accountants, and makes recommendations to the Board on the engagement of the independent registered public accountants. The Audit Committee held four meetings during the fiscal year ended February 29, 2020. At each of these meetings, the Audit Committee met with the independent registered public accountants (see Report of the Audit Committee elsewhere in this Proxy Statement) for the purpose of reviewing our quarterly and annual results.
The Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become Board members, reviewing candidates recommended by our shareholders, recommending to the Board the director nominees for the annual meeting of shareholders, developing and recommending to the Board a set of corporate governance principles and playing a general leadership role in our corporate governance. One meeting of this Committee was held during the fiscal year ended February 29, 2020. The Nominating and Corporate Governance Committee is currently comprised of Mr. Clerico, Mr. McDaniel and Dr. Neal, each of whom qualifies as “independent” under the rules of NASDAQ, with Mr. Clerico serving as chairman. Their activities are governed by a written charter.
The Compensation Committee, Audit Committee and Nominating and Corporate Governance Committee charters can each be found on our website at http://www.edcpub.com.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2020, no member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries. None of our executive officers or members of our Board of Directors serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 4, 2020, the number of shares of our common stock held by any persons known to our management to be beneficial owners of more than 5% of our outstanding common stock, and the number of shares of our common stock beneficially owned by each of our directors, each of the executive officers named in the Summary Compensation Table, and by all directors and nominees and executive officers as a group.
Shares Beneficially Owned | ||||||||||||
Name of Beneficial Owner | Number | Percentage (1) | ||||||||||
Red Oak Partners, LLC | (2 | ) | 632,834 | 7.7 | % | |||||||
Columbia Management Investment Advisers, LLC | (3 | ) | 486,386 | 5.8 | % | |||||||
John A. Clerico | 53,000 | * | ||||||||||
Joshua J. Peters | (4 | ) | 31,955 | * | ||||||||
Dr. Kara Gae Neal | 1,000 | * | ||||||||||
Ronald T. McDaniel | 4,150 | * | ||||||||||
Randall W. White | 1,423,245 | 17.0 | % | |||||||||
Craig White | (5 | ) | 524,415 | 6.3 | % | |||||||
Heather Cobb | (5 | ) | 103,040 | 1.2 | % | |||||||
Dan O'Keefe | (5 | ) | 112,426 | 1.3 | % | |||||||
All directors and executive officers as a group (8 persons) | 2,253,331 | 27.0 | % | |||||||||
(1) | The number of shares of Common Stock outstanding on June 4, 2020, with respect to a person or group includes (a) 8,352,253 shares outstanding on such date. |
(2) | Pursuant to a Schedule 13D (Amendment No. 2) filed by Red Oak Partners, LLC with the SEC on July 16, 2018 and adjusted for the two-for-one stock split distributed on August 22, 2018. Includes 298,526 shares held by The Red Oak Fund, LP (including 121,330 shares previously held by Pinnacle Opportunities Fund, L.P. prior to its merger with The Red Oak Fund, LP as of December 31, 2018), 74,898 shares held by The Red Oak Long Fund, LP, and 259,410 shares held by The Red Oak Institutional Founders Long Fund, LP. The funds are each controlled by Red Oak Partners, LLC. The business address is 150 E. Palmetto Park Road, Suite 800, Boca Raton, FL 33432. |
(3) | Pursuant to a Schedule 13G filed jointly by Columbia Management Investment Advisors, LLC and Ameriprise Financial, Inc. (parent holding company) with the SEC on February 14, 2020. The business address of Columbia Management Investment Advisers, LLC is 225 Franklin Street, Boston, MA 02110. |
(4) | Mr. Peters ownership, updated through June 9, 2020, includes 15,663 shares owned indirectly through power of attorney-voting rights or performance based fees for advisory services associated this these indirect shares. |
(5) | Includes indirect ownership of 82,546 shares held in the Company’s LTI Plan Account. These share have been issued but the service requirement has not been met. |
* | Less than 1 percent |
SECTION 16 (A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers, and any persons holding more than ten percent of our Common Stock are required to report their initial ownership of our Common Stock and any subsequent changes in that ownership to the SEC and to furnish the Company with a copy of each such report. Specific due dates for these reports have been established and we are required to disclose in this proxy statement any failure to file by these dates during and with respect to fiscal year 2020. To our knowledge, based solely on review of the copies of such reports furnished to us, during and with respect to fiscal year 2020, all Section 16(a) filing requirements were satisfied.
EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age, period of service and title of each of our Executive Officers as of June 4, 2020, are listed below:
Randall W. White Age: 78 | President, Chief Executive Officer and Chairman of the Board (“CEO”) President, Chief Executive Officer and Chairman of the Board of EDC since 1986 and Treasurer of EDC from February 1984. From 1980 until joining EDC in 1983, Chief Financial Officer of Nicor Drilling Company, Tulsa, Oklahoma, an oil and gas drilling company. |
Dan O’Keefe Age: 51 | Chief Financial Officer and Corporate Secretary (“CFO”) Chief Financial Officer and Corporate Secretary since 2017. Prior to joining EDC, Mr. O’Keefe was the Vice President-Finance from August 2015 through September 2016 of Tulsa Inspection Resources, LLC, an oilfield services company. Mr. O’Keefe held the positions of Chief Financial Officer and Corporate Secretary of Tulsa Inspection Resources, LLC from September 2010 to August 2015. |
Craig White Age: 51 | Chief Operating Officer (“COO”) Chief Operating Officer since 2018. Previously, Vice President Information Technology from 1994 through July 2018. Randall W. White and Craig White are father and son, respectively. There are no other family relationships among our executive officers and directors. |
Heather Cobb Age: 44 | Chief Sales and Marketing Officer (“CSMO”) Chief Sales & Marketing Officer since 2018. Previously, Vice-President, UBAM from January 2014 through July 2018 and National Sales Manager, UBAM from February 2011 through January 2014. Prior to joining EDC, Ms. Cobb worked in the non-profit sector, both in health and the arts. |
Summary Compensation Table
Name and principal position | Fiscal year | Salary ($) | Bonus ($) (1) | Stock awards ($) (2) | Option awards ($) | Non-equity incentive plan compensation | Nonqualified deferred compensation earnings | All other compensation ($) (3)(4) | Total ($) | |||||||||||||||||||||||||
Randall W. White - CEO | 2020 | 270,000 | 75,000 | - | - | - | - | 1,300 | 346,300 | |||||||||||||||||||||||||
2019 | 263,100 | 175,600 | - | - | - | - | 2,600 | 441,300 | ||||||||||||||||||||||||||
2018 | 218,200 | 50,400 | 4,600 | 273,200 | ||||||||||||||||||||||||||||||
Dan O’Keefe - CFO | 2020 | 210,000 | 40,000 | - | - | - | - | 10,600 | 260,600 | |||||||||||||||||||||||||
2019 | 199,600 | 80,600 | 766,000 | - | - | - | 7,300 | 1,053,500 | ||||||||||||||||||||||||||
2018 | 174,000 | 400 | 200 | 174,600 | ||||||||||||||||||||||||||||||
Craig White – COO | 2020 | 178,600 | 40,000 | - | - | - | - | 9,900 | 228,500 | |||||||||||||||||||||||||
2019 | 156,100 | 80,600 | 766,000 | - | - | - | 11,700 | 1,014,400 | ||||||||||||||||||||||||||
2018 | 117,700 | 28,400 | 7,100 | 153,200 | ||||||||||||||||||||||||||||||
(1) | The amounts reported for fiscal 2019 and fiscal 2020 reflect the annual cash bonus payments earned under the Company’s Short-Term Incentive Plan. The fiscal 2018 bonus amounts were separately approved by the Board of Directors. The amounts reported were realigned in the current year to match the bonus payments with the period earned. Previously, cash bonus payments were reported as compensation in the year in which it was paid. The above table includes three years of historical compensation to reflect this realignment. |
(2) | The amounts reported reflect the grant-date fair values of restricted share awards granted to each NEO, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation. For a discussion of the assumptions used to calculate the value of our restricted share awards, see Note 10 to our audited financial statements included in our Annual Report on Form 10-K for the year ended February 29, 2020. As explained in Note 10, the awards granted during 2019 “cliff vest” after 5 years of continued employment. |
(3) | Does not include the value of perquisites or other personal benefits because the aggregate amount of such compensation, if any, did not exceed the lesser of $25,000 or 10% of the annual salary and bonus in any of the fiscal years reported in the Summary Compensation Table. |
(4) | The primary component in other compensation is the company match the employee received from participating in the Company’s 401(k) plan. |
ANNUAL BONUSES AND EQUITY AWARDS
SHORT-TERM INCENTIVE PLAN
The Short-Term Incentive Plan (“STI Plan”) was initially approved by the Board of Directors by unanimous consent on January 9, 2018 and is updated and approved by the Compensation Committee each year. The current STI Plan has three measurement criteria for bonus accrual and payout based on factors that the Board deemed most important to the success of the Company:
| ● | 60% is based on achieving target pre-tax profitability (Return on Sales) |
| ● | 25% is based on revenue growth during the year |
| ● | 15% is based on the individual participant’s performance |
STI Plan awards begin to accrue when the Company exceeds the minimum threshold for each measurement criteria, and each measurement criteria has a maximum payment level. STI Plan awards are paid out after the completion of the annual audit and approval by the Compensation Committee.
2019 LONG-TERM INCENTIVE STOCK PLAN
The 2019 Long-Term Incentive Plan (“LTI Plan” or “Plan”) was approved by the Board of Directors by a unanimous consent on May 25, 2018, and later approved by the shareholders on July 24, 2018. The Plan covers an aggregate of 600,000 shares of the Company's Common Stock. Awards of stock pursuant to the Plan must be made on or before February 28, 2022.
The 2019 LTI Plan is intended to allow selected employees and officers to acquire or increase equity ownership, thereby strengthening their commitment to our success and stimulating their efforts on our behalf, and to assist us in attracting new employees and officers and retaining existing employees and officers. The Plan is also intended to provide annual incentive compensation opportunities to designated executives that are competitive with those of other major corporations, to optimize our profitability and growth through incentives that are consistent with our goals.
The 2019 LTI Plan provides for the awards of restricted stock based on the Company achieving three escalating annual Net Revenues targets over a three-year period. The first award of 200,000 shares of restricted stock will be made for exceeding the initial annual Net Revenues target of $100,000,000. The second award of an additional 200,000 shares of restricted stock will begin to be awarded for exceeding annual Net Revenues of $112,500,000 up to the full award of shares for reaching the second targeted annual Net Revenues of $130,000,000. The third award of 200,000 shares of restricted stock will begin to be awarded for exceeding annual Net Revenues of $146,250,000 up to the full award of shares for reaching the third targeted annual Net Revenues of $160,000,000. Should the Company’s annual Net Revenues exceed $160,000,000 in any of the three years under the plan, the 2019 LTI Plan calls for the full award of the 600,000 shares of restricted stock to be issued. Awards of restricted stock will be made based on interpolation for years that Net Revenues exceed an established Net Revenues target but do not fully reach the next Net Revenues target. Net Revenues under the Plan is defined as Gross Sales, less Discounts plus Transportation Revenue, similarly as presented on the Company’s Statement of Earnings.
The restricted share awards granted under the 2019 LTI Plan contain both service and performance conditions. The Company recognizes share compensation expense only for the portion of the restricted share awards that are considered probable of vesting. Shares are considered granted, and the service inception date begins, when a mutual understanding of the key terms and conditions between the Company and the employee have been established. The fair value of these awards is determined based on the closing price of the shares on the grant date. The probability of restricted share awards granted with future performance conditions is evaluated at each reporting period and compensation expense is adjusted based on the probability assessment.
Restricted share awards under the plan will be issued to participants after the completion of the fiscal year and the completion of the annual audit. An awardee receiving shares of restricted stock will have all of the rights of a shareholder, including the right to vote the shares and the right to receive any dividends on the shares. Any quarterly cash dividends declared after the restricted stock award is made but before the vesting period is completed, will be reinvested in Company shares through the purchase of Treasury Stock at the opening trading price on the dividend payment date. Shares purchased with quarterly cash dividends will also retain the same restrictions until the completion of the original vesting period associated with the awarded shares. Awardees may request removal of the restrictions on the stock certificates following the completion of five years of service from the start of the fiscal year that the award is earned. Any awardee failing to complete the required five years of service, subject to certain vesting exceptions, will forfeit their award.
During fiscal year 2019, the Company granted approximately 308,000 restricted shares under the 2019 LTI Plan with an average grant-date fair value of $9.94 per share. The Company did not grant any additional shares in fiscal 2020, but recognized $665,100 of compensation expense associated with the shares granted in fiscal 2019. The remaining compensation expense for these awards, totaling approximately $1,995,400, will be recognized ratably over the remaining vesting period of approximately 36 months. Mr. Randall White received no awards associated with the 2019 LTI Plan as he has elected not to participate in the 2019 LTI Plan.
OUTSTANDING EQUITY AWARDS AS OF FISCAL YEAR ENDED FEBRUARY 29, 2020
Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards; number of securities underlying unexercised unearned options (#) | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | Equity incentive plan awards; number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards market or payout value of unearned shares, units or other rights that have not vested ($) | |||||||||||||||||||||||||||
Randall W. White | - | - | - | $ | - | N/A | - | $ | - | - | $ | - | ||||||||||||||||||||||||
Dan O’Keefe | - | - | - | $ | - | N/A | - | $ | - | 82,546 | $ | 425,937 | ||||||||||||||||||||||||
Craig White | - | - | - | $ | - | N/A | - | $ | - | 82,546 | $ | 425,937 | ||||||||||||||||||||||||
The fundamental philosophy of our compensation program is to offer competitive compensation opportunities for our executive officers, based primarily on the individual executive’s personal performance relative to his or her area of responsibility and the contribution to our short-term and long-term strategic objectives. This philosophy is further driven by the concept of rewarding the executive officers through a cash bonus program and an equity awards program when the Company meets certain performance requirements.
Each compensation package for the executive officers of the Company is reviewed annually by the Compensation Committee and submitted to the Board of Directors for their approval.
The foundation of our executive compensation program is based upon the promotion of our short-term and long-term business objectives, the creation of a performance-oriented environment and the enhancement of shareholder value through the greatest achievable profitability. The elements of our executive compensation program include: base salary compensation, Short-Term Incentive Plan (“STI Plan”) and the Fiscal Year 2019 Long-Term Incentive Plan (“LTI Plan”).
Base salary compensation is intended to compensate the executive officers at a level commensurate with their responsibilities and their contribution to the short-term and long-term objectives of the Company. The Compensation Committee further takes into account the local and general economic conditions, future business prospects, and length of employment with the Company. Both the STI Plan and the LTI Plan are based upon the key metrics including pre-tax profitability of the Company, sales growth and individual performance metrics.
In its annual review of executive officer compensation for fiscal 2020, the Compensation Committee considered the base salary, STI Plan awards and LTI Plan awards for the Company’s Chief Executive Officer, Randall W. White, Chief Financial Officer, Dan O’Keefe and Chief Operating Officer, Craig White, in light of the Company’s overall performance for fiscal 2020 and the performance of these executives relative to the long-term objectives of the Company. Based on that review, the STI Plan awards were authorized. There were no LTI Plan awards issued for fiscal 2020.
John A. Clerico, Chairman
Ronald T. McDaniel
Dr. Kara Gae Neal
The Audit Committee of the Board of Directors is comprised of the directors named below. Each member of the Audit Committee is an independent director as defined by NASDAQ rules. A written charter adopted by the Board of Directors governs the Audit Committee’s activities. The Audit Committee has reviewed and discussed our audited financial statements with management, which has primary responsibility for the financial statements.
HoganTaylor LLP is responsible for expressing an opinion on the conformity of our audited financial statements with accounting principles generally accepted in the United States of America. The Audit Committee has discussed with HoganTaylor LLP the matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees,” as amended, which includes, among other items, matters relating to the conduct of an audit of our financial statements. The Audit Committee has received the written disclosures and the letter from HoganTaylor LLP required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees” and has discussed with HoganTaylor LLP their independence from the Company. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020 and in our fiscal year 2020 Annual Report to Shareholders.
Submitted by the members of the Audit Committee of the Board of Directors,
John A. Clerico, Chairman
Ronald T. McDaniel
Dr. Kara Gae Neal
OTHER INFORMATION
The following table sets forth the aggregate fees billed to the Company for the fiscal years ended February 29, 2020 and February 28, 2019 by our independent registered public accountants HoganTaylor LLP and other accounting firms.
Fiscal Year | Fiscal Year | |||||||
2020 | 2019 | |||||||
Audit Fees (1) | $ | 135,500 | $ | 134,000 | ||||
Audit related fees | - | - | ||||||
Tax fees (2) | 10,000 | 10,000 | ||||||
All other fees (3) | 39,106 | 51,475 | ||||||
Total | $ | 184,606 | $ | 195,475 | ||||
(1) Audit fees consisted of audit work performed in the preparation of the annual financial statements, as well as work generally only the independent auditor can reasonably be expected to provide, such as review of our interim unaudited financial statements included in our Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.
(2) Tax fees consist of tax compliance, tax planning or tax advice.
(3) Other fees consist of third party services performed to audit the Company’s 401(k) Plan and associated 11-K filing, assist the Company in reviewing and calculating research and development costs for tax credit application purposes, assist the Company in completing responses to state and local sales tax audits, and ERISA and DOL form preparation and filings.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Our Board of Directors, upon recommendation of the Audit Committee, has appointed HoganTaylor LLP as our independent registered public accounting firm for the year ending February 28, 2021. HoganTaylor LLP was our independent accountant for the year ended February 29, 2020, and has served as our auditor since 2005.
Although the selection and appointment of independent registered public accounting firm is not required to be submitted to a vote of shareholders, the Board of Directors has determined to ask our shareholders to approve this appointment.
PROPOSAL FOR ACTION AT THE ANNUAL MEETING
Proposal Two:
RATIFICATION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Approval of Proposal Two to ratify the appointment of HoganTaylor LLP as our independent registered public accounting firm for the year ending February 28, 2021, will be determined from “votes cast.” “Votes cast” means all shares that are voted "for," "against," "withhold," or "abstain" with respect to the proposal. Abstentions will have the effect of a vote against the proposal and broker non-votes will be treated as not present and will not be considered in determining the "votes cast" either for or against Proposal Two.
Representatives from HoganTaylor LLP are expected to be present at the annual meeting of shareholders. These representatives will be given the opportunity to make a statement, if they so desire, and will be available to respond to any appropriate questions.
The Audit Committee is responsible for appointing, setting compensation and overseeing the work of our independent registered public accountants. The Audit Committee has established a policy regarding pre-approval of all audit and non-audit services provided by our independent registered public accountants. On an ongoing basis, our management presents specific projects and categories of service, including services that will generate fees classified as “tax” and “all other fees,” to the Audit Committee for which advance approval is requested. The Audit Committee reviews those requests and advises management if the Audit Committee approves the engagement of our independent registered public accountants for such services. On a periodic basis, our management reports to the Audit Committee regarding the actual spending for such projects and services compared to the approved amounts.
Your Board of Directors recommends that you vote “FOR” the ratification of the appointment of HoganTaylor LLP as our independent registered public accounting firm for the year ending February 28, 2021.
The rules of the SEC govern when a company must include a shareholder’s proposal in its proxy statement and identify the proposal in its form of proxy when the company holds an annual or special meeting of shareholders. Under these rules, proposals that shareholders would like to submit for inclusion in our proxy statement for our 2021 annual meeting of shareholders should be received by our Corporate Secretary no later than February 13, 2021. Only those shareholder proposals eligible for inclusion under the rules of the SEC will be included in our proxy statement.
In addition, if a shareholder wishes to present a proposal at the 2021 annual meeting that will not be included in our proxy statement and the Company is not notified prior to May 15, 2021, then the proxies solicited by our management for the 2021 annual meeting will include discretionary authority to vote on the proposal in the event that it is properly brought before the meeting.
The proxy statement is accompanied by the Annual Report of the Company for its fiscal year ended February 29, 2020. Shareholders are referred to such Annual Report for information about our business and activities, but such Annual Report is not incorporated in this Proxy Statement and is not deemed to be a part of the proxy soliciting material.
Copies of our Annual Report on Form 10-K filed with the SEC pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, will be provided without charge to record or beneficial owners of shares of our common stock entitled to vote at the meeting. Written requests for copies of said report should be directed to Randall W. White, Chairman of the Board, President, Chief Executive Officer of the Company, at our corporate headquarters located at 5402 S 122nd E Ave, Tulsa, Oklahoma 74146.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on July 9, 2020
• The proxy statement and annual report to shareholders are available at http://www.edcpub.com.
Management does not intend to present and does not have any reason to believe that others will present at the annual meeting any item of business other than as stated in the Notice of Annual Meeting of Shareholders. If, however, other matters are properly brought before the meeting, it is the intention of the persons named as proxies in the accompanying form of Proxy to vote the shares of our common stock represented thereby in accordance with their best judgment and discretionary authority to do so.
By order of the Board of Directors
Randall W. White
Chairman of the Board, President
and Chief Executive Officer
Tulsa, Oklahoma
June 12, 2020
15
5402 S 122nd E Ave
Tulsa, OK 74146
www.edcpub.com